Europe Tops World in Network-Readiness

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China not only ranks 59th but also fell nine rungs in this year's study, in part due to the difficulty of diffusing ICT from wealthy coastal cities to the poorer interior. India ranks 44th and Brazil, 53rd.

Other Regions

The report offers generally mixed signals about the developing world. In Latin America, ICT access and use are spreading rapidly, thanks to the fact that several area governments—including those of Guatemala, Mexico, and Argentina—are making a national priority out of bridging the digital divide. One technique is to quickly grant licenses to cell-phone operators and foster open markets for Internet providers. Several nations in the region have even appointed ministries of technology, or at least incorporated IT issues into the portfolio of the ministry of industry, says Dutta; this signals an increasing awareness in the developing world that access to technology is crucial for prosperity.

The situation is far bleaker in Sub-Saharan Africa, which lags well behind the rest of the world. Worse, every country in the region except for Nigeria dropped in this year's networked-readiness index. But Markus Haacker, an economist at the International Monetary Fund who authored a case study on Africa for the Global Information Technology Report, says that despite the drop in rankings there are signs of slow progress there.

For one thing, the spread of cheap cell-phone service in Africa since the late 1990s has strengthened small businesses, allowing them to communicate more easily with clients and partners. That has also encouraged quicker economic transactions. Sectors such as manufacturing, which generally are not information-intensive, "are very much benefiting from Africa's improved quality as a location for production," says Haacker.

By contrast, Internet access only started appearing widely in Africa in 2001 and remains hampered by frequent power outages and other problems. That makes it unlikely that Internet-based jobs, such as call centers, will set up shop there anytime soon, Haacker says.

Behind the U.S. Slip

The U.S., which topped the Networked Readiness Index last year, dropped to No. 7 in part because of an increasingly slow and complex legal and regulatory environment. Professor Dutta points out that the U.S. is burdened by a cumbersome taxation system (ranked No. 31 in the world); a legal framework (ranked No. 25) that produces innumerable corporate lawsuits; and a limited use of ICT to streamline government (No. 40 in the world). The U.S. even remains behind in mobile-phone usage, being ranked No. 48 worldwide.

"They cannot assume that because it's the leading economy of the world, it's also at the leading edge of using technology for development," says Dutta. According to the report, the U.S. still ranks strongly in Internet penetration, university education, investment in research and development, and venture capital. But when all the numbers are added up, Europe is moving ahead faster in building for the future.

Carlin is a reporter in BusinessWeek's Paris bureau.